Bruker Corp (BRKR) 2004 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Bruker BioSciences quarterly earnings conference call. My name is David and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of today's conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes.

I would like to now turn the presentation over to your host for today's call, Ms. Laura Francis, Chief Financial Officer, Bruker BioSciences. Please go ahead, ma'am.

Thank you and thanks for joining us today. As the operator mentioned, I'm Laura Francis, the CFO of Bruker BioSciences Corporation. Also with me today is Frank Laukien, the President and CEO of Bruker BioSciences.

This quarter, we began our first full year at Bruker BioSciences. During the call, Frank will discuss the results and progress at Bruker BioSciences, while I take you through the Bruker BioSciences financial details and our second-quarter outlook.

I'd like to begin the call by reading the Safe Harbor statement. This discussion will include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including but not limited to risks and uncertainties relating to technological approaches, product development, manufacturing, market acceptance, costs and pricing of our products, dependence on collaborative partners, suppliers, competition, intellectual property, litigation and other risk factors discussed from time to time in our filings with the SEC. We expressly disclaim any obligation to release publicly any revisions to forward-looking statements, and these statements may not be rebroadcast, recorded, transcribed or otherwise used without the written consent of Bruker BioSciences.

During this call, we will refer to certain financial measures that are not in accordance with Generally Accepted Accounting Principles, or GAAP. A reconciliation of non-GGAP financial measures used on this call to the most directly comparable GAAP measure is available in our press release.

Now, with that, I'd like to turn the call over to Frank to discuss highlights from the quarter and progress at Bruker BioSciences.

Thank you, Laura, and good morning, everyone. This is Frank Laukien, the President and CEO. Thanks again for taking the time to join us this morning.

I would like to highlight some key results for the first quarter of 2004. For the first quarter, our revenues grew 8 percent to 68.2 million, within our previously provided revenue guidance. In addition, we continued to improve profitability with GAAP net income this quarter of 1.0 million, or 1 penny per diluted share, compared to a GAAP net loss of 1.6 million, or a loss of 2 pennies per diluted share, in the first quarter of 2003. I'll also compare it sequentially; our GAAP net income in the fourth quarter of 2003 was 0.3 million.

When you look at adjusted EBITDA, we had adjusted EBITDA growth to 6.4 million this first quarter of 2004, compared to 5.8 million in the first quarter of 2003, or sequentially 4.4 million in Q4 of 2003. Thus, we now begin to see healthy sequential quarterly improvements in our bottom line, which we expect to continue during this year.

Our first quarter of 2004 revenues were at the low end of our revenue range because our strong fourth-quarter 2003 bookings were heavily weighted towards the end of the quarter. We therefore expect to see the greater part of revenue growth from these bookings in the second and subsequent quarters of this year.

We anticipate robust revenue growth in the rest of this year for two reasons. First of all, at our Bruker Daltonics operating company, we continue to see positive trends, both in our life-science mass spectrometry business as well as our nuclear, biological and chemical, or NBC, detection business. Second, at our Bruker AXS operating company, we expect to finally see the recovery of the x-ray systems business, also in terms of revenues. We have seen stronger bookings for some time but in the second quarter, we expect to see the recovery of the x-ray business in revenues in the second and subsequent quarters of 2004, with growth closer to normal levels of greater than 10 percent. This represents a market (ph) improvement over the Bruker AXS business in the last four quarters. In addition, at the recent Pittcon in March, 2004, both of our operating companies introduced numerous new products, which should allow us to enter new market segments or to further improve the competitiveness of our products in existing market segments.

Now, I would like to come back to our progress on profitability, where we are focusing much of our management attention. In the first quarter 2004, the Bruker Daltonics business showed strong improvement in profitability metrics. The gross margins for the Bruker Daltonics business were greater than 50 percent this quarter, compared to an average of 47.7 percent last year. The improvement in gross margins is the result of increased sales of our newer, higher-margin products. This gross margin improvement helps to increase adjusted EBITDA for Bruker Daltonics by 34 percent to 5.2 million, compared to 3.9 million in Q1 of '03, or sequentially compared to 3.9 million in Q4 of 2003.

The Bruker AXS business also continued its trend of higher gross margins, despite the weaker revenues, with a 41.1 gross margin this quarter compared to 40.3 percent gross margin in Q1 of '03. The increase in gross margins in the Bruker AXS business is due to the impact of several redesigned cost programs on a number of different product lines. However, the bottom line in the Bruker AXS business continued to be impacted by weak revenue in the first quarter, resulting in EBITDA of 1.4 million this first quarter, compared to 2.0 million in Q1 of 2003.

Taking my eyes off the numbers for a moment, overall, I feel that we are at an inflection point for the Company. First, we will complete the merger-related restructuring of our business by the end of the second quarter. That restructuring, if you recall, entails the closure of two production sites in Europe, where we had overcapacity in the business. Some of this production on the x-ray side will be moved to the United States, which will also help us to better hedge our bottom-line exposure to the euro, something we were struggling with last year. We anticipate that the closure of these two sites will improve our bottom-line performance by about 2.5 million on an annual basis.

Second, we will fulfill an old legacy, low-margin NBC detection contract that we had with the UK Ministry of Defense for some time. This contract has reduced -- or had reduced our gross margins by approximately 1 percent for most of the quarters of last year.

While these factors will still have an impact on our results during this second quarter, the pending second quarter of '04, we expect significant further improvements in profitability during the second half of the year, as previously discussed when we gave guidance and goals for the year.

I also see a lot of exciting prospects in the midterm for the business. In addition to our existing, main revenue and growth drivers, there are three fairly new developments that we believe will begin to contribute to the growth of Bruker BioSciences in the midterm. These are the clinical proteomics research business, the NBC detection business, and the third one is advanced materials research applications for nanotechnology. Let me discuss each one of those briefly before turning it back over to Laura.

The clinical proteomics marketplace represents an opportunity for us to explore the rapidly growing new market segment. Since launching our ClinProt solution last year, we've seen strong acceptance of this product line and believe we're making significant gains in the clinical proteomics research market. We believe that these gains are driven by our superior mass spec performance in terms of high-resolution profiling for biomarkers as well as our unique ability to identify discovered biomarkers on the same TOF-TOF platform. Moreover, the reproducibility, scalability, robust automation have and the lower cost per assay of our magnetic bead array sample preparation platform positions us well for the larger validation studies that will now be needed to develop putative (indiscernible) biomarkers into robust protein molecular diagnostic tests of the future.

Based upon the initial positive market reaction to our ClinProt line and our performance advantages, we believe that ClinProt will be a significant growth contributor for us in 2004. This product line, importantly, also gives us an opportunity for the first time to build a significant stream of recurring revenues from high-margin consumables.

Another business that is poised for substantial growth is our NBC, or nuclear biological Chemical detection business. After 9/11, we were disappointed initially at the relatively small amount of funds earmarked for NBC detection. We all know that most of those funds were funneled to explosives detection, primarily at airports. This finally appears to be changing. Governments, in particular the U.S. government, appeared to be greatly increasing budget allocations in the next few years for NBC detection.

Bruker Daltonics is really one of the few companies in the world that is in a position to meet the needs of these customers with a fairly broad product line. We already experienced very healthy -- greater than 50 percent -- growth in our NBC bookings in '03 with small and medium-sized contracts. The Company, however, is now under consideration for some much larger contracts. We expect these funding trends to have a significant, positive impact on the Company in '05 and '06 and hopefully beyond.

My final point -- new funding for nanotechnology applications worldwide bodes well for our x-ray business. X-ray is one of the few methods available to analyze nanostructures for a wide variety of nanotechnology applications, nondestructively. The purpose of analysis is to optimize the design, structure and the use of these new nanomaterials. With the launch of our NanoSTAR product in late 2003, Bruker AXS is poised to capitalize on the growing demands in nanostructures analysis.

So, I think this provides a summary of our results for the quarter, as well as on some of the near and medium-term opportunities that we see. I will now turn the discussion back over to Laura to discuss the financial details for the first quarter, as well as our outlook for the second quarter. Laura?

Frank gave you some of the highlights of our performance. Now, I'd like to provide you with a little more detail by taking you through the P&L in the next few minutes, including information on our business segments.

Bruker BioSciences' first-quarter 2004 revenues increased 8 percent to 68.2 million, compared to revenues of 63.1 million in the first quarter, 2003. Excluding favorable currency effects, net sales decreased 3 percent year-over-year.

In the first quarter of 2004, revenues for the Bruker Daltonics business increased 14 percent, or a 2 percent increase, excluding currency effects, to 38.8 million. Revenue growth was driven by all product lines, life-science mass spectrometry, substance detection systems, as well as aftermarket sales.

Revenues for the Bruker AXS business increased 1 percent or an 8 percent decline, excluding currency effects, to 29.3 million in the first quarter of 2004. Revenues for our elemental composition and thermal analyzer systems, as well as aftermarket sales, drove growth but were offset by continued softness in life-science x-ray systems sales. As Frank mentioned, we expect the Bruker AXS business to finally recover to our target growth rate in the second quarter, based on bookings as well as backlog.

For the first quarter of 2004, Bruker BioSciences revenue was derived 41 percent from life-science mass spec systems, 29 percent from x-ray systems, 5 percent from NBC detection systems, and 25 percent from aftermarket sales.

Now, for some profitability metrics, in the first quarter of 2004, GAAP net income was $1 million, or 1 penny per diluted share, compared to a net loss of 1.6 million, or a negative 2 pennies per share ,in the first quarter of 2003. We are no longer burdened with significant charges for mergers, restructuring and other special items, which is driving some of the improvement in our bottom line. But we are also seeing operational improvement driven by the Daltonics business.

We look at EBITDA to evaluate our operational performance. Bruker BioSciences adjusted EBITDA was 6.4 million for the first quarter 2004, compared to 5.4 million for the first quarter, 2003. Bruker Daltonics adjusted EBITDA was 5.2 million, compared to 3.9 million for the first quarter, 2003. The significant growth in Bruker Daltonics EBITDA is primarily due to increased gross margins. Bruker AXS, on the other hand, saw a decline in EBITDA to 1.4 million in the first quarter of '04, compared to 2 million in the first quarter of '03. The decline is primarily due to the lower sales, which should turn around in Q2.

The Bruker BioSciences gross margin for the fourth quarter was 47.5 percent, as compared to 45.8 percent for the comparable quarter in 2003 and 44.6 percent for the year 2003. Also discussed previously by Frank, this improvement in gross margins is driven by a trend at Bruker Daltonics towards high-margin systems, as well as continued improvement at Bruker AXS from redesign-to-cost programs. So, the numbers this quarter are proving out our strategy to increase gross margins through a variety of means.

Selling, general and administrative expense as a percent of product revenue increased to 29.6 percent for the first quarter of 2004, compared to 28.5 percent for 2003. The increase occurred within sales and marketing expense within the Bruker AXS business. While revenues were low, bookings were strong, resulting in higher sales costs. The Bruker Daltonics business, on the other hand, reduced SG&A expenses as a percent of product revenue. We expect to gain significant leverage on SG&A expense at Bruker AXS in the coming quarter, similar to the Bruker Daltonics experience this quarter.

R&D expense has increased to 15.3 percent of product revenue, compared to 14 percent in 2003. Once again, the AXS business experienced an increase due to low product revenues. Part of the increase is also due to additional R&D costs incurred on a new government R&D contract in Germany at Bruker Daltonics. Costs are incurred in R&D, while the reimbursement is classified in other revenues.

We also had higher than usual R&D expenses this quarter due to our significant product introductions at Pittcon. This is a metric that we will continue to watch, as it is our objective to reduce R&D expense as a percentage of product revenues by approximately 1 percent a year.

From a tax perspective, our tax rate this quarter was 49 percent. This rate is higher than our standard rate of 40 percent, since we could not benefit losses in the U.S., due to our not-operating loss position. We are working diligently on this situation in order to meet our target by year-end.

From a cash perspective, we ended the quarter with 76.7 million in cash. That amount grew to approximately 90 million after our secondary offering in late April. In addition, the offering increased our public float from 25 to 43 percent, which should provide increased liquidity to all of our shareholders. We are particularly pleased that our base of institutional investors has broadened considerably.

In terms of cash, we used cash from operations of $4 million during the quarter. The Bruker AXS business used most of this cash, with 2 million reducing payables to finally pay off final merger-related expenses from last year and the remaining 2 million due to growth in inventory from a variety of new product introductions in late 2003. Our expectation for 2004 is the generation of cash based upon profitability and leverage of inventory, primarily at Bruker Daltonics.

I will now discuss our expectations for the second quarter of 2004. We expect to see growth in revenues based on the previously discussed factors. However, we also need to consider the impact on profitability of the low-margin substance detection contract, overcapacity in business is still undergoing restructuring and currency effects. Based on all of these factors, Bruker BioSciences currently estimates that second-quarter 2004 net sales will be in the range of 70 to 74 million, with adjusted EPS of 0 cents to 2 cents per share. There's no change in our full-year guidance, with growth of 13 to 15 percent in revenues and EPS of 7 to 9 cents per share.

We are pleased with the start to the year in terms of backlog and bookings growth, despite revenues at the low end of our range. We are also pleased with the profitability trend. We anticipate a turnaround occurring in the second quarter in our Bruker AXS business, which has struggled for the last four quarters. We believe will see further improvement in the third quarter and beyond, based upon the restructuring of our business and fulfillment of the low-margin substance detection contract. We are also no longer burdened with significant cash and P&L charges related to the merger. Based on all of these factors, we are optimistic that we can deliver significant revenue and profitability growth this year.

With that, I'd like to open it up to questions.

Thank you, ma'am. (OPERATOR INSTRUCTIONS). Derik De Bruin from UBS.

Good morning. In your press release, you talked about the timing of systems acceptances. Is this basically installed systems that you are waiting for the customers who sign off on or something else?

I will answer that question, Derik. The way that our revenue recognition works is we not only ship product but we install product and we receive signed acceptances for product. So, given that we had particularly strong bookings in the fourth quarter but towards the end of the quarter, given the time-lag it takes for shipment to acceptance, we expect to see significant growth in the second quarter.

I guess, with respect to that, could you just give us a little bit more detail in terms of the backlog for the bookings that you've seen?

In terms of the bookings that we saw in the first quarter of 2004, we had bookings growth that was greater than 15 percent, so consistent with our target objectives.

Which business was that?

That was the business combined.

Okay. I guess could you just talk a little -- I didn't quite follow your comments on the tax rate. Could you go over that again, please?

Yes. In 2003, we incurred significant losses in the U.S. due to the merger, and so what we needed to do was take a valuation allowance in the U.S., and so any losses that we incur in the U.S. we cannot tax-effect with the benefit. Therefore, we had a higher tax rate in the first quarter of 2004, because of that impact. So what we're doing is we are working on various issues in order to make sure to resolve that issue.

So, for an effective tax rate for 2004 would be what?

The target would be 40 percent.

Okay. Just a couple more general market questions -- could you give us some more color on NBC contract? Frank, if you could just go over talk about funding available for the nanotechnology, what's available from the government, industrial and some of the market trends there? It's not an area I'm that overly familiar with.

Okay. On the NBC detection systems, first of all, Derik, we have recently received some initial medium-sized contracts; for instance, we had a press release in January/early February I believe about a $2 million contract for this remote chemical agents detector we received from the U.S. Department of Defense. This is a passive infrared device that can scan the horizon 360 degrees and look up to three miles out to see whether there's any chemical agents attack -- clouds rolling in. That system is being evaluated by the army, by the Department of Defense, in '05. We understand that they have very significant future budget planning for systems of this type. Now, we are not the only system being evaluated but we are one of the finalists for that type of large force-protection type system.

We also actually since -- in the second quarter, received a finalized, relatively small a $0.5 million contract from the Department of Homeland Security Advanced Research Agency, or SARPA (ph), the equivalent of (ph) in the Defense Department, for further improvement and modifications to one of our off-the-shelf, handheld chemical agent points (ph) detectors. There are very few companies in the world that have these types of products, and we believe ours has certain technological advantages, particularly a very, very little rate of false-positives, which is really critical for this technology; you do not get false alarms, for obvious reasons.

So, we're going through that; we are going to work through that relatively small adaptation contract throughout this year but again, in '05 and '06, we believe that the Department of Homeland Security has budgeted very significant, very sizable numbers for acquiring these handheld chemical detectors for various first-responders and law-enforcement agencies within the United States.

So, those are some of the big funding trends that are now evolving among the horizon where these big acquisition fundings in the past typically were available for explosives detection, which was of course particularly emphasized at airports. But the trends are changing there.

On the nanotechnology side, it's really very much an international game. Most major industrial and aspiring industrial nations have nanotechnology initiatives because many see or believe or perceive it as having the potential at least to be the next industrial revolution. Accordingly, there is a lot of strategic R&D funding by governments for nanotechnology, as well as, of course, some VC funding going into a myriad of smaller nanotechnology companies. Now, we are not a nanotechnology company per se, but we provide some of the tools that are useful and necessary to do nanotechnology or nanomaterials research. Does that clarify things a little bit?

That actually helps quite a bit. Thank you very much.

(OPERATOR INSTRUCTIONS). Spencer Nam from S.G. Cowen.

Thanks for taking my questions. I have a couple of questions. First of all, the ASX business recovery that you mentioned in the second quarter, could you maybe give a little more detail on sort of which customer base do you see the recovery coming from? Also, sort of any sense of any of the bookings that were made last year, 2003, that fell through this quarter -- if there's any significant aspect to that?

I think, generally -- last year, within the Bruker AXS business, actually the advanced materials and elemental analysis business did reasonably well, as well as the smaller thermal analyzer business in Japan, but we were struggling with the life-science, chemical and biological crystallography business. That weaker part of the business, of the AXS business, has improved. First of all, we think there is a spending -- the general spending trends improved and then the budget improved in the second half of last year. Also, we introduced some significant improvements to that product line and new additions to that product line that we think have substantially improved our competitive position.

In the so-called XRD, or advanced materials research business, we were very strong, but we think, with further product introductions, we've improved our competitive situation even better for the traditional technology and systems that are used in x-ray advanced materials research. Plus, we've introduced this NanoSTAR system in the second half of '03 particularly for analysis at this 1 to 100 nanometer size range, which is what is considered the nanotechnology area.

To try to address the second part of your question, maybe it would be helpful to just go back to Q4 bookings trends. We had publicly disclosed, in early this year, that, in both of our businesses, the new order bookings in Q4 grew greater than 25 percent -- actually considerably greater than 25 percent -- compared to Q4 of a year ago. Q4 is also always particularly strong, but in our business, because some of the delivery times are fairly lengthy for the larger pieces of instrumentations and moreover, we don't recognize revenue when we ship, we recognize revenue generally upon acceptance, that's why some of the does not always immediately hit the bottom line and the topline and the bottom line in the next quarter, but it is often spread out over several quarters.

So, you feel that should -- this quarter is kind of -- the revenue trajectory was somewhat expected, or was that -- it's within the expectations that you would -- based on the bookings from last quarter, Q4 '03, that you expecting (sic) this trend, you know --?

That's right, Spencer, yes. Also, of course, in Q1 compared to Q1, the currency effects are still very strong, whereas looking ahead at Q2 comparisons to the prior year Q2, the growth that we are predicting -- which is, in absolute numbers, very considerable, I think it's in the mid-teens, certainly -- much less of that is currency-driven, because the rapid depreciation or decline of the dollar, appreciation of the euro occurred -- much of that had occurred by Q2 of the last year. So, we will seek much less currency effect, which was still pretty extreme, as you can see, in Q1.

So, by the half-year point, we expect to be very much on track towards the 13 to 15 percent revenue growth that we had projected for the full year.

What percent of that would be from currency, 13 to 15?

Overall, for the year, we had estimated approximately 5 percent of the impact was currency.

Okay. Just a couple of quick questions -- in terms of the proteomic research opportunity, you mentioned that there will be some impact in 2004, based on some of the new products. Do you have any sense of what the magnitude of that will be?

We don't have a dollar number or a percentage number specifically for that.

Okay. The final question I have is, in terms of the bookings for the rest of the year for the entire company, do you feel that -- what kind of yield -- or do you have any sense of sort of based on historical data, do you have any sense of what sort of yield you could expect out of that?

Well, very close to 100 percent. I mean, we don't usually see many cancellations; it happens every once in awhile, but that's pretty rare. What we see sometimes are delays; sometimes the customer says, hey, my laboratory is not ready; please delay shipment by a quarter or something like that. But the yield is very high. This is different from some industries like the semiconductor equipment industry or so that I've observed, where sometimes, when there's a downturn, all of a sudden customers generally cancel orders but that's not a trend that we're familiar with at all.

One quick question for Laura -- you mentioned, in the call, the breakdown of the revenue for the Daltonics. I was wondering if you had something similar for the AXS.

In terms of the --?

The subsegments like -- (Multiple Speakers).

In terms of x-ray sales, x-ray systems sales were 66 percent of total revenues and aftermarket sales were 34 percent.

Great.

That number also happens to be in the press release, if you look at the Bruker AXS segment information.

David Cohen from Farallon Capital.

I wondered if you could give us CapEx for the quarter, and also explain -- G&A was a little higher than expected. If you could just talk about the gap between CapEx and depreciation, going forward, if that's attainable, ect.?

In terms of our CapEx, we had approximately $1 million of CapEx in the first quarter. In terms of our G&A expense --.

I'm sorry, depreciation and amortization was higher than I expected.

So, the depreciation and amortization expense during the quarter that we experienced is relatively consistent with what we've incurred previously. I mean, as you know, that's made up of a couple of different components. Number one is the depreciation on the buildings that we have, and then we also have our demonstration equipment that we incurred that expense upon.

So, I mean, although the number has grown from the comparable period, if you look at that number compared to Q4, it is relatively consistent.

Can D&A -- can CapEx sustainably be (indiscernible) less than D&A? Is that a sustainable thing or if you could just comment on that?

I think, since we've made very large investments in facilities and infrastructure in both companies following their respective IPOs, we feel that we have -- even though we eliminated capacity a little bit by closing the two smaller production sites, at our major production sites, we think we have substantial room for productivity improvement, or in other words, continue that mid-teens growth for several years really without major capital/CapEx expense, but for more of the ongoing CapEx, which typically tends to be around 5 million a year.

That's great. Then lastly, just on NBC opportunity, are there specific dates when we could expect news or sometime sort of late '04, '05, '06? I just wondered on that.

No specific dates, I mean, the dates are up to the customer, which are the Department of Defense, the Department of Homeland Security decision-makers. But the timeframes for these decisions are expected to be in early '05 in one case -- sometimes during '05 in the Homeland Security case and either late '05/early '06 in the Department of Defense case, but obviously it's up to the customer and they have not set a specific deadline.

Thank you very much.

By the way, I shouldn't give the impression that our NBC business is now crucially dependent on some of these big contracts. In fact, it is doing very well with a lot of the smaller and medium contracts that really are growing very nicely and which are typically in the business. These couple of large contract and funding opportunities are sort of upside on top of a business that's recovering nicely right now and probably will see nice growth -- did see nice growth last year in terms of bookings and will see very nice growth this year in both bookings and also in revenue.

(OPERATOR INSTRUCTIONS). Andrew Schramm from Robert W. Baird.

Good morning. Frank, could you give us an idea of what you're seeing from your academic customers? On a global basis, what kind of demand function and funding characteristics are you seeing there?

Good morning, Andrew. As you know, last year, academia, medical schools, nonprofit customers were very strong for us really because, from the beginning of the year, biotech wasn't buying at all and pharma was pretty selective and didn't spend much on R&D infrastructure, something that did change. So this year, we see the biotech is back; they have more cash and they have pent-up demand, so the biotech industry, not only the big Amgens, are back at the customer segments, delightfully. The pharmaceutical industry is spending much more broadly; I wouldn't say broadly -- still selectively but they're certainly spending a lot more in the second half and continuing into the beginning of this year.

Also, we as a company sort of are repositioned a little bit our product offerings (sic) in the pharma and biotech industry. We are almost exclusively for drug-discovery where some of our newer products now also go into toxicity screening and efficacy markers, things that are typically done in drug-development, so there is a bigger part of the pharma budget that we now can address with our products. So, that implies that pharma and biotech will be a higher percentage of sales this year than last year but last year has really gone down dramatically compared to prior years, so it may be more returning to normal levels this year.

Academic spending -- I don't know that I have a meaningful, a global statistics or number on that, certainly not this early in the year. We see it continuing to be rather strong but again, maybe more important than the general macro patterns for us is really what part of that budget can we address with our products. That is really changing quite dramatically. We used to basically sell to the universities primarily, and there is a lot of funding there. But with our newer offerings, particularly in the group at the Daltonics side, we get much more access to medical schools and medically driven, clinically driven research budgets, which are as large, if not -- actually, they're probably larger than university research budgets. Again, with our broadening product line, we address a much broader addressable market of that academic/medical school type funding.

Great. One follow-up -- if you have a breakdown by geography that would be great and also perhaps just touch on what type of growth you're seeing on the major geographies. Thanks.

Geography, we tend to give those types of breakdowns later in the year when statistically they are a little bit more meaningful. After just one quarter, it really doesn't mean all that much.

Without going into specific percentages, Japan is having a weak start at the beginning of this year, first quarter and probably also second quarter; that has to do with some specific factors in Japan that I think had also been alluded to by others in our industry in some of their earnings calls or press releases. The U.S. looks quite healthy. The rest of Asia-Pacific looks quite healthy, and Europe looks fine but nothing spectacular, I would say, so far this year. So, it's a strong recovery in North America and continued strength in Asia-Pacific with Japan a bit weak.

A follow-up question from Derik De Bruin from UBS.

Just following the most recent offering, could you discuss the terms of share count for the second quarter and for the full year?

In terms of share account, we will have approximately 89.5 million shares outstanding, and that number should be relatively consistent. There was a little jump. In total, we had 3,450,000 shares -- of primary shares that were provided.

Thank you.

There are no further questions at this time, sir.

Okay, we would like to thank all of you for joining us and we will speak to you after the second quarter. Thank you, and have a good day.

Thank you, sir. Thank you, ladies and gentlemen, today for your participation. This concludes your conference call. You may now disconnect. Good day.